Government Contracts Alert Government Contracts Alert
  10.15.2013  
 
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How to Survive the U.S. Government Shutdown in the Short-Term

If you are a government contractor, you never thought it could get worse, until it did.  It is a fact that the House and the Senate have been unable to avoid a government shutdown.  Any day now, they will probably pass a continuing budget resolution (CR) to temporarily fund the Government until another deadline or cliff is reached.  Uncertainty is your biggest concern, yet it has become the ordinary course of business for most government contractors over the past few years.  A shutdown, unlike sequestration, presents even more unique problems.  What are the immediate impacts and what, if any, prudent steps can you take in response?

What has been the immediate impact?  A non-exclusive list would include the following:

  • Most federal agencies have ceased significant operations, affecting GAO, DFAS, contracting offices and even E-Verify, among others.  Note that the IRS emphasized that all tax deadlines remain in effect, although tax refunds will be delayed during the shutdown. You can still try to enroll in Obamacare as well.
  • With few exceptions, there will be no new awards, no modifications, no task orders on indefinite delivery/indefinite quantity (IDIQ) type contracts, and delayed or stopped payments.
  • Access to facilities may be restricted, inspectors not available and procurement officials inaccessible for any purpose.
  • Confusion exists as to whether particular contracts have funds that were previously appropriated.
  • Subcontractors expecting payment when primes are paid may experience delays.
  • Contract cash flow, the lifeblood of small contractors, will be adversely affected.
  • The Anti-Deficiency Act, with its threat of criminal penalties, hovers over the Government and prevents them from entering contracts without appropriations.

What should government contractors do now to minimize the damage and protect their equities? 

  • Continue to perform on current contracts and comply with all contractual terms and conditions, if possible, especially those that are fully funded.
  • Maintain accurate records of shutdown-related impacts and costs.
  • In cost-type contracts, ensure compliance with the notification requirements of the “Limitation of Cost” or Limitation of Funds” provision of the contract (e.g. FAR 52.232-20 & 52.232-22).
  • Continue to submit all proposals by posted deadlines, unless a written extension has been granted by the contracting officer; continue to monitor FedBizOpps (www.fbo.gov).
  • If you are considering a bid protest, understand that GAO will not acknowledge receipt of protests until the shutdown ends (although the GAO will accept bid protests by email).  This can affect your protest strategy, especially if you are seeking to obtain an injunction preventing the awardee from performing the contract.
  • Be sensitive to mission creep – where the Government requests you to perform additional contract tasks due to Government personnel unavailability.
  • Be leery of non-warranted individuals requesting you to work and get paid later; recall that the Anti-Deficiency Act does not allow unauthorized individuals to spend money.  Only authorized Government officials, i.e. contracting officers, can make binding commitments.
  • Evaluate current contracts and anticipate continued delays and disruptions.  Consider how to mitigate the problems that will arise over time.
  • Segregate costs as documentation for a potential delay and disruption claim under the Request for Equitable Adjustment provision of your contract, if applicable.
  • Share this information with your teammates and subcontractors.

Regardless of how long the shutdown continues, it will end.  When it does, there will necessarily be a period of catch-up in all federal agencies which means normal activities will probably not occur for some period once the Government begins operating on a normal schedule again.  Also, you may want to consult with your legal counsel concerning any possible claims.  Good luck!

 
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